Orphaned Stock with a 25% Free Cash Flow Yield

Cheap, ignored, and about to start paying a dividend. Why I broke my own rule on commodity related businesses and took a position in this one.

Today’s stock:

• 3.1x 2027 EV/EBITDA.

• 25% free cash flow (FCF) yield on 2027e.

• Contracted backlog of 3.5x revenue.

• 70% of book value, and enough cash flow to clear the debt by 2028 (assuming no further acquisitions).

I’m sharing a different type of idea today. I usually avoid investing in commodity related industries for numerous reasons; however, I have broken that rule by taking a position in this stock. This is a stock on a 25% FCF yield (with a c.5% prospective dividend yield on a 20% to 30% of Adj. PAT proposed payout ratio) with minimal attention paid to it given it is listed in the UK, reports in USD and the majority of its revenue stems from the Middle East.

This company has grown at a good clip over the past few years aided by a supportive market environment as it operates in a corner of the offshore fleet where there are fewer orders, with the orderbook running at about 3% of the regional fleet with some of the competing vessels >40 years old. Net debt has been primarily reduced with internal cash-flow from 8x EBITDA to 1.4x EBITDA as of YE25. Contracts run 3-5 years and the customers are typically national oil companies and the company reports EBITDA margins of c.60%.

Today’s stock is….

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